FILED PURSUANT TO RULE 424(B)(5)
FILE NO. 333-76589
PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED MAY 12, 1999)
VALENCE TECHNOLOGY, INC.
676,521 SHARES
COMMON STOCK
The 676,521 shares of Common Stock being offered are all being offered
by Valence. On October 27, 1999, the last reported sale price of the shares of
Common Stock on the Nasdaq National Market was $4.53 per share. The Common Stock
is listed on the Nasdaq National Market under the symbol "VLNC."
Investing in Valence common stock involves a high degree of risk. See
"Risk Factors" beginning on page S-4.
We are offering 676,521 shares of our common stock to an institutional
investor pursuant to this prospectus supplement and the accompanying prospectus.
The common stock will be purchased at a negotiated purchase price of $4.4345 per
share for a total purchase price of $3,000,000. The purchase price reflects the
average of recent trading prices of the common stock on the Nasdaq National
Market, net of an 8% discount.
The shares of Valence common stock offered or sold under this
prospectus supplement and prospectus have not been approved by the SEC or any
state securities commission, nor have these organizations determined that this
prospectus supplement or prospectus is accurate or complete. Any representation
to the contrary is a criminal offense.
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS OCTOBER 28, 1999.
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PROSPECTUS SUPPLEMENT SUMMARY
Valence Technology, Inc. was incorporated in Delaware in March 1989 under
the name Ultracell, Inc. We changed our name to Valence Technology, Inc. in
March 1992. Our executive offices are currently located at 301 Conestoga Way,
Henderson, Nevada 89015 and the telephone number is (702) 558-1000.
PROSPECTUS SUPPLEMENT SUMMARY
Valence Technology, Inc. was incorporated in Delaware in March 1989
under the name Ultracell, Inc. We changed our name to Valence Technology, Inc.
in March 1992. Our executive offices are currently located at 301 Conestoga Way,
Henderson, Nevada 89015 and the telephone number is (702) 558-1000.
THE OFFERING
Shares offered . . . . . . . . . . . . . . .We are offering all of the 676,521
shares being offered hereby.
Shares outstanding after this offering . . .Following this offering, there
will be 31,564,272 shares of our
common stock outstanding based upon
the number of shares outstanding on
October 28, 1999. This number does
not include shares that may be
issued pursuant to the exercise of
stock options and warrants currently
outstanding or which may be granted
under our stock option plans, or
upon the conversion of preferred
stock outstanding.
Use of proceeds. . . . . . . . . . . . . . .For general corporate purposes,
including:
- acquiring raw materials and
building inventory of finished
goods;
- financing capital expenditures;
and
- working capital.
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RISK FACTORS
AN INVESTMENT IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. YOU
SHOULD NOT MAKE SUCH AN INVESTMENT IF YOU CANNOT AFFORD THE LOSS OF YOUR ENTIRE
INVESTMENT. IN ADDITION TO THE OTHER INFORMATION IN THIS PROSPECTUS SUPPLEMENT
OR PROSPECTUS, YOU SHOULD CONSIDER CAREFULLY THE FOLLOWING FACTORS IN EVALUATING
VALENCE AND ITS BUSINESS BEFORE PURCHASING ANY SHARES OF OUR COMMON STOCK.
We Have An Immediate Need For Additional Capital.
We have an immediate need for additional capital which, if not obtained, would
cause us to reduce developmental efforts and impair our ability to commercialize
our products. At September 26, 1999, we had cash and cash equivalents of
$3,212,000. We anticipate that, after taking into account projected revenues and
receipt of funds from other sources, we will need to raise a minimum of $25
million in either a debt or equity financing to fund planned capital
expenditures, research and product development, marketing and general and
administrative expenses and to pursue joint venture opportunities through the
remainder of fiscal 2000 and through the first quarter of fiscal 2001. Our cash
requirements, however, may vary materially from those now planned because of
changes in our operations, including changes in OEM relationships or market
conditions. There can be no assurance that funds for these purposes, whether
from equity or debt financing agreements with strategic partners or other
sources, will be available on favorable terms, if at all. These factors raise
substantial doubts about our ability to continue as a going concern. Our
financial statements do not include any adjustments that might result from the
outcome of this uncertainty. The effects of such adjustments, if necessary,
could be material.
We Are A Development Stage Company With A Limited Quantity of Products Currently
Available For Sale.
We are a development stage company and cannot anticipate when, or if, we will
ever have significant revenues from a product. We have derived our revenues
primarily from a research and development contract with Delphi Automotive
Systems Group, which we completed in May 1998. We presently have limited
quantities of commercially developed and manufactured products available for
sale. These factors raise substantial doubt about our ability to continue as a
going concern. Our financial statements do not include any adjustments that
might result from the outcome of this uncertainty, and such adjustments, if
necessary, could be substantial.
Our Current Available Capital And Future Revenues, If Any, Will Not Be
Sufficient To Meet Our Future Operating Needs.
We have generally incurred operating losses since inception in 1989 and had an
accumulated deficit of $170,090,000 as of September 26, 1999. We cannot assure
you that we will ever achieve or sustain significant revenues or profitability
in the future. We have negative working capital and have sustained recurring
losses related primarily to the research and development and marketing of our
products. We expect to incur significant losses in the future as we continue our
product development, begin to build inventory and continue our marketing
efforts. We will need to secure additional financing in order to continue
operations past 1999 unless we begin to generate significant operating revenue.
We will have to continue to devote a significant amount of management time to
obtaining financing.
We May Not Be Able To Obtain Additional Capital, In Which Case We Would Need To
Reduce Developmental Efforts And May Not Be Able To Commercialize Our Products.
If we are unable to achieve profitability or we are unable to secure additional
financing on acceptable terms, we will be unable to continue to fund our
operations. We are actively pursuing capital grant advances from the Northern
Ireland Industrial Development Board, and our success in these efforts depends
on our achieving cumulative revenues from the sale of batteries of $4 million.
We may not achieve such cumulative revenue over the short-term, if at all.
Additionally, a lack of capital may require us to license to third parties
rights to commercialize products or technologies that we might otherwise seek to
develop ourselves, and to scale back or eliminate our research and product
development programs. The unavailability of adequate funds would have a material
adverse effect on our business, financial condition and results of operations.
We No Longer Have a Collaborative Partner to Assist Us in Development of Our
Batteries, Which May Limit Our Ability to Develop and Commercialize Our
Products.
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We have received substantially all our revenues to date from a research and
development agreement with Delphi Automotive Systems Group, which we completed
in May 1998. The Delphi agreement was for joint development in the automotive
market. Although we have held discussions with original equipment manufacturers
(OEMs) in the portable consumer electronics and telecommunications markets about
possible strategic relationships as a means to accelerate introduction of our
batteries into these markets, we cannot assure you that we will be able to enter
into any such alliances. The use of alliances for our development, product
design, volume purchase and manufacturing and marketing expertise can reduce the
need for development and use of internal resources. Further, even if we could
collaborate with a desirable partner, there is a possibility that the
partnership may not be successful. The success of any strategic alliance that we
enter into depends on, among other things, the general business condition of the
partner, its commitment to the strategic alliance and the skills and experience
of its employees.
Because Our Batteries Are Only Sold When Incorporated Into Other Products, We
Will Need To Rely On Original Equipment Manufacturers To Commercialize Our
Products.
To be successful, our batteries must gain broad market acceptance. In addition,
our success will depend significantly on our ability to meet OEM customer
requirements by developing and introducing on a timely basis new products and
enhanced or modified versions of its existing products. OEMs often require
unique configurations or custom designs for battery systems which must be
developed and integrated in the OEM's product well before the product is
launched by the OEM. Thus, there is often substantial lead time between the
commencement of design efforts for a customized battery system and the
commencement of volume shipments of the battery system to the OEM (referred to
as the "design in time"). If we are unable to design, develop and introduce
products that meet OEMs' and other customers' exacting requirements on a timely
basis, our business, results of operations and financial condition could be
materially adversely affected. To determine the requirements of each specific
application, we will be dependent upon OEMs and other intermediaries such as
battery pack designers into whose products our batteries will be incorporated.
There is a possibility that we will not receive adequate assistance from OEMs to
successfully commercialize our products. Furthermore, the perceived safety risks
associated with lithium, an element used in our batteries, may impede acceptance
of our batteries by OEMs or end users.
We Do Not Yet Have The Sales Staff, Support Capabilities And Distribution
Channels To Distribute Our Products On a Commercial Scale.
To implement our strategy successfully, we may have to develop a sizeable sales
staff and product support capabilities, as well as third party and direct
distribution channels. We cannot assure you that we will be able to establish
sales and product support capabilities, or be successful in our sales and
marketing efforts.
We May Not Be Able To Cost-Effectively Manufacture Our Batteries.
To be successful, we must manufacture commercial, high-quality quantities of our
products at competitive costs. We have produced prototype and production quality
products that we believe have performance characteristics that are suitable for
a broad market. However, additional development will be required to enable us to
consistently produce battery systems with these characteristics. In addition, to
achieve broad commercialization of our products, we will need to reduce
manufacturing costs of our battery systems. Our batteries may not be
manufacturable in long-run commercial quantities to the performance
specifications demanded by customers. We must still be able to competitively
manufacture these batteries. Our current manufacturing technology might need to
be more fully developed before we will be able to manufacture our batteries in
commercial quantities. Any failure to achieve acceptable yields of commercial
quality batteries in commercial quantities, and thereby reduce unit
manufacturing costs, could have a material adverse effect on our business,
results of operations and financial condition.
We Are In The Early Stage Of Manufacturing, And If We Are Unable To Develop
Manufacturing Capabilities In A Cost Effective Manner, We Will Not Be Able To
Generate Profits; Our Business Also Faces Certain Manufacturing Risks, Potential
Capacity Constraints And Risks Relating To Proposed Expansion.
To date, we have not manufactured batteries on a commercial scale. Any failure
to achieve acceptable yields of commercial quality batteries in commercial
quantities, and thereby to reduce our unit manufacturing costs, could have a
material adverse effect on our business, results of operations and financial
condition. Until recently, our batteries have been only manufactured on our
pilot manufacturing line, which is able to produce prototype cells in
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quantities sufficient to enable customer sampling and testing and product
development. We are currently in the early stages of transitioning production to
an automated high volume production line that will work with our newest battery
technology in our manufacturing facility in Mallusk, Northern Ireland. The
redesign and modification of the manufacturing facility, including its
customized manufacturing equipment, will continue to require substantial
engineering work and expenses and is subject to significant risks, including
risks of cost overruns and significant delays. In addition, in order to rapidly
scale up the manufacturing capacity, we will need to begin fabrication of a
second automated production line before completing full qualification of the
first line. In automating, redesigning and modifying the manufacturing
processes, we have depended on, and will continue to depend on, several
developers of automated production lines, which have limited experience in
producing equipment for the manufacture of batteries. A key determinant of our
current and future production capacity and profitability is the production yield
of our manufacturing process. The redesign and modification of our manufacturing
facility and the development and implementation of automated production lines
will entail significant risks and will require a substantial investment of our
capital. As part of our manufacturing ramp-up, we will need to hire and train a
substantial number of new manufacturing workers. The availability of skilled and
unskilled workers in Northern Ireland, the site of our manufacturing facility,
is limited due to a relatively low unemployment rate. We may not successfully
develop improved processes, design required production equipment, enter into
acceptable contracts for the fabrication of such equipment, obtain timely
delivery of such equipment, implement multiple production lines or successfully
operate the Mallusk facility. We may not be able to successfully automate our
production on a timely basis, if at all, and such automation may not result in
greater manufacturing capacity or lower manufacturing costs than our pilot
production line. Customer relationships could be damaged if we fail to begin
volume manufacturing on a timely basis. Such failure could cause lost
opportunities and have a material adverse effect on our business, results of
operations and financial condition.
We Are Experiencing Delays In Qualifying Our Manufacturing Facilities.
We have been unable to meet our prior schedules regarding delivery,
installation, de-bugging and qualification of the Northern Ireland facility
production equipment. As most of the production equipment is being specially
manufactured for us, further problems may develop and cause further delay in our
current schedules. We are improving and bringing many of the manufacturing
processes that we are implementing in this production equipment up to date for
the first time from our laboratory scale prototype work. We may need to further
refine the improved processes, which could cause substantial delays in the
qualification and use of this equipment. Furthermore, if we are able to refine
our process, we may not be able to produce the required amount of qualification
samples to potential customers. From our discussions with potential customers,
we expect that customers will require an extensive qualification period once the
customer receives its first commercial product off a production line.
We Depend On Our Suppliers For Certain Key Raw Materials To Develop And
Manufacture Our Batteries.
We depend on sole or limited source suppliers for certain key raw materials used
in our products. We generally purchase sole or limited source raw materials
pursuant to purchase orders placed from time to time and have no long-term
contracts or other guaranteed supply arrangements with our sole or limited
source suppliers. Our suppliers may not be able to meet our requirements
relative to specifications and volumes for key raw materials, and we may not be
able to locate alternative sources of supply. We may not be able to purchase raw
materials at an acceptable cost. In addition, the raw materials which we utilize
must be of a very high quality, and we have at times in the past experienced
delays in product development due to the delivery of nonconforming raw materials
from our suppliers.
Our Rechargeable Batteries May Not Be Able To Achieve Or Sustain Market
Acceptance.
To achieve market acceptance, our batteries must offer significant price and/or
performance advantages over other current and potential alternative battery
technologies in a broad range of applications. Our rechargeable batteries may
not be able to achieve or sustain any such advantages. Even if our rechargeable
batteries provide meaningful price or performance advantages, there is a risk
our batteries may not be able to achieve or maintain market acceptance in any
potential market application. The success of our products also will depend upon
the level of market acceptance of OEMs' and other customers' end products that
incorporate our batteries, a circumstance over which we have little or no
control. If our rechargeable batteries do not achieve and maintain significant
price and/or performance advantages over other technologies and achieve
significant and sustained market acceptance, or if customers' applications which
incorporate our products do not achieve lasting market acceptance, our business,
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results of operations and financial condition could be materially adversely
affected. If we do manufacture our batteries in commercial quantities and they
fail to perform as expected, our reputation could be severely damaged, which
would have a material adverse effect on our ability to market our batteries even
if the defect were corrected.
There Has Been, And Continues To Be, A Rapid Evolution Of Battery
Technologies.
The battery industry has experienced, and is expected to continue to experience,
rapid technological change. Various companies are seeking to enhance traditional
battery technologies, such as lead acid and NiCd, and other companies have
recently introduced or are developing rechargeable batteries based on nickel
metal hydride ("NiMH"), lithium and other emerging and potential technologies.
Competing technologies that outperform our batteries could be developed and
successfully introduced and, as a result, there is a risk that our products may
not be able to compete effectively in our targeted market segments.
Our Success Depends Heavily On Our Senior Management Personnel And On Our
Ability To Attract And Retain Key Employees.
Our business success is highly dependent upon the active participation of our
senior management personnel. We do not have written employment contracts with
any key employees and do not maintain key man life insurance policies for any of
our employees. We believe that our future prosperity will depend in large part
on our ability to attract and retain highly skilled technical, managerial, and
marketing personnel who are familiar with and experienced in the battery
industry. Competition for such personnel, in particular for product development
and product implementation personnel, is intense, and we compete in the market
for such personnel against numerous companies, including larger, more
established competitors with significantly greater financial resources than us.
We have at times experienced difficulty in recruiting qualified personnel, and
we cannot be certain that we will be successful in attracting and retaining
skilled personnel. Our inability to attract and retain other qualified employees
could have a material adverse effect on our business.
Our Competitors May Develop Batteries Similar Or Superior To Ours Or Otherwise
Compete More Successfully Than We Do.
Competition in the battery industry is intense. The industry consists of major
domestic and international companies, most of which have financial, technical,
marketing, sales, manufacturing, distribution and other resources substantially
greater than those that we have. Although we believe that our batteries will
compete in most segments of the rechargeable battery market, there is a risk
that other companies may develop batteries similar or superior to ours. In
addition, many of these companies have name recognition, established positions
in the market, and long standing relationships with OEMs and other customers.
While these competitors are engaged in significant development work on various
battery systems (including electrochemistries such as NiCd, NiMH and lithium),
we believe that much of this effort is focused on achieving higher energy
densities for low power applications such as portable electronics. One or more
new, higher energy rechargeable battery technologies could be introduced which
could be directly competitive with, or be superior to, our technology. We
believe that our primary competitors are existing suppliers of Lithium Ion,
competing polymer and, in some cases, NiMH batteries. These include Matsushita
Industrial Co., Ltd., Sony, Toshiba, SAFT America, Inc. ("SAFT") and PolyStor
Corp. All of these companies are very large and have substantial resources and
market presence. Also, we expect that we will compete against other types of
batteries in the targeted application segments on the basis of performance, cost
and ease of recycling, and there is a risk that we may not be able to compete
successfully against manufacturers of other types of batteries in any of the
targeted applications. In addition, in the rechargeable battery market there are
a variety of competing technologies. The capabilities of many of these competing
technologies have improved over the past year, which has resulted in a customer
perception that our technology may not offer as many advantages as previously
anticipated.
We Face A Risk That Our Pending Patent Applications Will Not Result In Issued
Patents And That Our Issued Patents Will Not Provide Protection Against
Competitors.
Our ability to compete successfully will depend on whether we can protect our
proprietary technology and manufacturing processes. We rely on a combination of
patent and trade secret protection, non-disclosure agreements and
cross-licensing agreements. Nevertheless, such measures may not be adequate or
safeguard the proprietary technology underlying our batteries. In addition,
employees, consultants and others who participate in the
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development of our products may breach their non-disclosure agreements with us,
and we may not have adequate remedies for any such breach. Moreover,
notwithstanding our efforts to protect our intellectual property, our
competitors may be able to develop products that are equal or superior to our
products without infringing on any of our intellectual property rights. In
addition, we may not be able to effectively protect our intellectual property
rights in certain countries. If existing or future patents containing broad
claims are upheld by the courts, the holders of such patents could require
companies to obtain licenses. If we are found to be infringing third party
patents, there is a risk that we may not be able to obtain licenses to such
products on reasonable terms, if at all. Our failure to protect our proprietary
technology may materially adversely affect our financial condition and results
of operations. Patent applications in the United States are maintained in
secrecy until patents issue, and since publication of discoveries in the
scientific or patent literature tends to lag behind actual discoveries by
several months, we cannot be certain that we were the first creator of
inventions covered by pending patent applications or the first to file patent
applications on such inventions. Therefore, our pending patent applications may
not result in issued patents and any of our issued patents may not afford
protection against a competitor.
Our Batteries Contain Potentially Dangerous Material, Which Could Expose Us
To Liability.
Battery technologies vary in relative safety as a result of their differing
chemical compositions. In the event of a short circuit or other physical damage
to the battery, a reaction may result with excess heat or a gas being released
and, if not properly released, may be explosive. We have designed our batteries
to avoid this risk, but if we are unsuccessful, we could be exposed to product
liability litigation. In addition, our products will incorporate potentially
dangerous materials, including lithium ions. While these materials are less
reactive than other potentially dangerous materials found in other types of
batteries such as metallic lithium, which is known in its metallic form to cause
explosions and fires if not properly handled, it is possible that these
materials will require special handling. It is possible that safety problems may
develop in the future. We are aware that if the amounts of active materials in
our batteries are not properly balanced and if the charge/discharge system is
not properly managed, a dangerous situation may result. Other battery
manufacturers using technology similar to ours include special safety circuitry
within the battery to prevent such a condition. We expect that our customers
will have to use such circuitry.
We Have Not Completed Safety Testing Our Batteries And Will Not Be Able To
Make Commercial Sales Of Our Batteries Until We Successfully Complete Such
Tests.
We have conducted extensive safety testing of our batteries and are in the
process of submitting batteries to UL for certification. As part of our safety
testing program, prototype batteries of various sizes, designs and chemical
formulations are subject to abuse testing, where the battery is subjected to
conditions outside the expected normal operating conditions of the battery.
While some prototype batteries have survived these tests, others have vented
gases containing vaporized solvents and have caught fire. Such results were
generally expected, and until we have completed testing we cannot make a valid
determination as to the conditions in which the battery must be operated.
Additionally, each new battery design requires new safety testing. Therefore,
safety problems may develop with respect to our battery technology that could
prevent or delay commercial introduction.
Safety Risks In Our Facilities Could Create Production Delays.
We incorporate safety policies designed to minimize safety risks in our research
and development activities and will also do so in our manufacturing processes.
There is a risk, however, that an accident in our facilities will occur. Any
accident, whether with the use of a battery or in our operations, could result
in significant delays or claims for damages resulting from injuries, which would
adversely affect our operations and financial condition.
The Strict Regulatory Environment In Which We Operate May Delay Shipments And
Impose Additional Costs On Us.
Prior to the commercial introduction of our batteries into a number of markets,
we may need to seek approval of our products by one or more of the organizations
engaged in testing product safety and/or agencies regulating transportation.
There is a risk that such agencies would not permit our batteries to be shipped
or used by the general public, and that changes in regulations, or in their
enforcement, will impose costly requirements or otherwise impede the transport
of lithium. If we are able to obtain such approvals, they could require
significant time and resources from our technical staff, cause delays in
shipments and, if redesign were necessary, result in further delays in the
introduction of our products. Because of the risks generally associated with the
use of lithium, we expect rigorous
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agency enforcement. Federal, state and local regulations impose various
environmental and health and safety controls on the storage, use and disposal of
certain chemicals and metals used in the manufacture of lithium polymer
batteries. Although we believe our activities conform to current environmental
regulations, there is a risk that changes in such environmental regulations will
impose costly equipment or other requirements. Any failure by us to adequately
control the discharge of hazardous wastes could also subject us to future
liabilities.
We Are Involved In Lawsuits That Could Negatively Impact Our Business.
We are subject to litigation arising from time to time in the course of our
business. We currently have three substantial lawsuits in which we are involved.
The first is a class action lawsuit by a class of persons who purchased our
Common Stock between May 7, 1992 and August 10, 1994, alleging that we violated
federal securities laws and seeking unspecified damages. The second involves a
claim by a manufacturer of one of our pieces of manufacturing equipment that we
owe it approximately $2,500,000; in this action, we have filed a counterclaim
against the manufacturer seeking damages to be determined at trial. The third is
a contract claim that we instituted against several parties; one party has filed
a counterclaim against us and third parties claiming damages of approximately
$900,000 based on breach of a contract, and this matter is presently stayed
pending settlement discussions. Although we believe that we have meritorious
defenses to these suits, if any of them is resolved unfavorably to us it could
have a material adverse effect on our financial condition.
The Failure Of Our Key Suppliers And Customers To Be Year 2000 Compliant Could
Negatively Impact Our Business.
We use a number of computer software programs and operating systems in our
internal operations, including applications used in financial business systems
and various administration functions. To the extent that these software
applications contain source code that is unable to appropriately interpret the
upcoming calendar year "2000," some level of modification or even possible
replacement of such source code or applications will be necessary. Given our
current information, we currently do not anticipate that such "Year 2000" costs
will have a material impact upon us. We have requested information regarding
"Year 2000" compliance from suppliers and providers of all of our mission
critical software systems and have obtained some responses. Based on the
information we currently have, all mission critical systems appear to be "Year
2000" compliant. We are currently contacting major vendors and customers to
obtain "Year 2000" compliance certificates. The failure of any of our key
suppliers or customers to be "Year 2000" compliant could have a material adverse
effect on our business, financial condition and results of operations.
Political Instability In Northern Ireland May Delay Progress In Our Northern
Ireland Facility.
The current political instability in Northern Ireland, which to date has had no
negative impact on our manufacturing plant, could delay our development of
manufacturing capabilities. Such delays could also cause us to lose significant
sales and marketing opportunities, as they would force our potential customers
to find other vendors to meet their needs.
Anti-Takeover Provisions In Our Corporate Charter Or Those Which Apply To Us By
Virtue Of The Application Of Delaware General Corporation Law Will Make It More
Difficult For A Third Party To Acquire A Majority Interest Of Our Outstanding
Voting Stock.
Our Board of Directors has the authority to issue up to 50,000,000 shares of
undesignated preferred stock and to determine the price, rights, preferences and
privileges of those shares without any further vote or action by the
stockholders. The rights of the holders of our capital stock are subject to the
rights of the holders of the Series A and Series B Preferred Stock and will be
subject to, and may be adversely affected by, the rights of the holders of any
preferred stock that may be issued in the future. While we have no present
intention to issue any additional shares of preferred stock, such issuance,
while providing desirable flexibility in connection with possible acquisitions
and other corporate purposes, could have the effect of making it more difficult
for a third party to acquire a majority of our outstanding voting stock. In
addition, we are subject to the anti-takeover provisions of Section 203 of the
Delaware General Corporation Law, which prohibits us from engaging in a
"business combination" with an "interested stockholder" for a period of three
years after the date of the transaction in which the person became an interested
stockholder, unless the business combination is approved in a prescribed manner.
The application of Section 203 also could have the effect of delaying or
preventing a change of control of Valence. Furthermore, our
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classified Board of Directors and certain other provisions of our Certificate of
Incorporation may have the effect of delaying or preventing changes in control
or management, which could adversely affect the market prices of our Common
Stock and Series A and Series B Preferred Stock.
If The Issuance Of Our Preferred Stock Violated Nasdaq's Listing Maintenance
Requirements, Or If We Otherwise Fail To Continue To Meet Nasdaq's Listing
Maintenance Requirements, Nasdaq May Delist Our Common Stock.
In late January 1999, Nasdaq released its guidance on "future priced securities"
and the necessity of the issuer to comply with Nasdaq's listing maintenance
requirements in issuing these securities. We believe that the issuances of our
Series A Preferred Stock and Series B Preferred Stock do not violate these
criteria, and that we are in compliance with Nasdaq's listing maintenance
criteria. However, in the event that Nasdaq were to determine that the issuance
of our Series A Preferred Stock and/or Series B Preferred Stock was in violation
of the Nasdaq listing maintenance requirements, or if we are otherwise unable to
continue to meet Nasdaq's listing maintenance requirements, Nasdaq may delist
us. Such delisting could have a material adverse effect on the price of our
Common Stock and on the levels of liquidity currently available to our
stockholders. We may not be able to satisfy these requirements on an ongoing
basis.
Conversion Of Preferred Stock And Sales Of Common Stock By CC Investments May
Depress The Price Of Our Common Stock And Substantially Dilute Your Stock.
If CC Investments were to exercise all of the warrants it holds and convert all
of the shares of preferred stock it owns, as of October 28, 1999 it would have
acquired approximately 1,925,000 shares of our Common Stock. The number of
shares into which the preferred stock converts increases at 6% per year. If CC
Investments exercises the warrants or converts our preferred stock into shares
of Common Stock and sells the shares into the market, such sales could have a
negative effect on the market price of our Common Stock and would dilute your
holdings in our Common Stock. Additionally, dilution or the potential for
dilution could materially impair our ability to raise capital through the future
sale of equity securities.
Our Stock Price Is Volatile, And We Do Not Pay, Or Expect To Pay, Dividends To
The Holders Of Our Common Stock.
The market price of the shares of our Common Stock has been and is likely to
continue to be highly volatile. Factors such as the fluctuation in our operating
results, announcements of technological innovations or new commercial products
by us or our competitors, governmental regulation, developments in our patent or
other proprietary rights or developments in our relationships with current or
future collaborative partners, and general market conditions may have a
significant effect on the market price of the Common Stock. We have never paid
any cash dividends and do not anticipate paying cash dividends on the Common
Stock in the foreseeable future.
Possible Variable Conversion Of Series B Preferred Stock.
After July 27, 1999, the Series B Preferred Stock will be convertible into a
larger amount of shares where our Common Stock trades at a price below $6.03 in
six out of ten consecutive trading days. For example, if on July 28, 1999 our
Common Stock in the previous ten trading days had been trading at or above
$6.03, the 7,500 shares of Series B Preferred Stock would be convertible into
approximately 1,289,000 shares of our Common Stock. If, however, on that date
the average of the lowest six closing bid prices of our Common Stock over the
previous ten trading days (referred in the table below as the "average price")
had been a lower price, then the Series B Preferred Stock would have converted
into a greater number of shares. As of October 31, 1999, CC Investments had
converted all of the Series A and $3 million of the Series B Preferred Stock.
The following table illustrates the effect noted above:
S-9
<PAGE>
Number of Shares into which the 4,500 shares
of Series B Preferred would convert
Average If Common Stock trades at
Price a price below $6.03 in six out
of ten consecutive trading days
$ 6.03 785,157
$ 5.00 946,899
$ 4.00 1,183,624
$ 3.00 1,578.165
The effect of this variable conversion rate, if it becomes applicable, will be
to depress further the market price of our Common Stock and to dilute further
stockholder holdings in our Common Stock.
S-10
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
The discussion in this prospectus supplement and in the prospectus
contains forward-looking statements that involve risks and uncertainties. Those
statements include words such as "anticipate," "estimate," "project," "intend,"
and similar expressions which we have used to identify these statements as
forward-looking statements. These statements appear throughout this prospectus
supplement and prospectus and are statements regarding our intent, belief, or
current expectations, primarily with respect to the operations of Valence or
related industry developments. You are cautioned that any such forward-looking
statements do not guarantee future performance and involve risks and
uncertainties, and that actual results could differ materially from those
discussed here, including under "Risk Factors," and in the documents
incorporated by reference in this prospectus supplement and in the prospectus.
DIVIDEND POLICY
Valence has not paid any cash dividends since its inception and does
not anticipate paying cash dividends in the foreseeable future. The terms of our
Series A preferred stock and Series B preferred stock prohibits the payment of
cash dividends without the prior consent of the holder.
USE OF PROCEEDS
The net proceeds to us from this offering will be $2,955,000. We plan
to use the net proceeds for general corporate purposes, including:
- acquiring raw materials and building inventory of finished goods;
- financing capital expenditures; and
- working capital.
Pending use of the net proceeds for any of these purposes, we may
invest the net proceeds in short-term investment grade instruments,
interest-bearing bank accounts, certificates of deposit, money market
securities, U.S. government securities or mortgage-backed securities guaranteed
by federal agencies.
S-11
<PAGE>
PRICE RANGE OF COMMON STOCK
Since May 7, 1992, our common stock has been traded on the Nasdaq
National Market under the symbol "VLNC." A summary of the high and low closing
sales prices during each quarter for our common stock on the Nasdaq National
Market follows:
<TABLE>
<CAPTION>
FISCAL 1998 HIGH LOW
<S> <C> <C>
Quarter ended June 29, 1997 $10 $5-3/4
Quarter ended September 28, 1997 9-1/8 6-7/8
Quarter ended December 28, 1997 9 4-1/4
Quarter ended March 29, 1998 6-1/2 4-1/4
FISCAL 1999
Quarter ended June 28, 1998 6-1/8 4-21/32
Quarter ended September 27, 1998 5-3/4 3-7/16
Quarter ended December 27, 1998 10-7/8 4-1/8
Quarter ended March 28, 1999 8-9/16 6-1/8
FISCAL 2000
Quarter ended June 27, 1999 8-7/16 6-1/2
Quarter ended September 26, 1999 7-3/8 4-3/8
</TABLE>
On October 27, 1999, the last reported sales price of our common shares
on the Nasdaq National Market was $4.53 per share.
As of October 27, 1999 and before the issuance of shares pursuant to
this prospectus supplement, we have 30,887,751 shares of common stock
outstanding.
The approximate number of record holders of our common stock as of
October 27, 1999, was 707.
PLAN OF DISTRIBUTION
We are selling the shares being offered hereby directly to one
investor. In connection with this sale, we are paying a finders fee to Caldwell
Capital Corp. in the amount of $45,000 and issuing warrants to the institutional
investor to purchase 7,500 shares of Valence common stock. Caldwell Capital
Corp. may be deemed to be an underwriter as defined in the Securities Act of
1933, and such finders fee and warrants received by them from us may be treated
as underwriting discounts and commissions under the Securities Act.
We estimate that the total expenses of the offering, including all
offerings under the prospectus but excluding underwriting discounts and
commissions, if any, will be approximately $68,900.
LEGAL MATTERS
The validity of the shares of our common stock offered by this
prospectus has been passed upon for Valence by Cooley Godward LLP, Palo Alto,
California.
S-12
<PAGE>
EXPERTS
The consolidated balance sheets as of March 28, 1999 and March 29, 1998
and the consolidated statements of operations, stockholders' equity (deficit),
and cash flows for the period from March 3, 1989 (date of inception) to March
28, 1999 and for each of the years ending March 28, 1999, March 29, 1998 and
March 30, 1997 incorporated by reference in this prospectus, have been
incorporated in reliance on the report, which includes an explanatory paragraph
regarding Valence's ability to continue as a going concern, of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
The balance sheet as of March 28, 1999, and the statements of
operations and accumulated deficit and cash flows for the year ended March 28,
1999, and incorporated by reference in this prospectus, have been incorporated
in reliance on the report, which includes an explanatory paragraph regarding
Hanil Valence Co., Ltd.'s ability to continue as a going concern, of Samil
Accounting Corporation, independent accountants, given on the authority of that
firm as experts in accounting and auditing.
S-13
<PAGE>
NO DEALER, SALES PERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS
SUPPLEMENT OR PROSPECTUS, AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY VALENCE.
THIS PROSPECTUS SUPPLEMENT OR PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL,
OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITY OTHER THAN THE NOTES OR
CONVERSION SHARES OFFERED BY THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS, NOR DOES
IT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE
NOTES OR CONVERSION SHARES TO ANYONE IN ANY JURISDICTION WHERE, OR TO ANY PERSON
TO WHOM, IT WOULD BE UNLAWFUL TO MAKE SUCH AN OFFER OR SOLICITATION. NEITHER THE
DELIVERY OF THIS PROSPECTUS SUPPLEMENT OR PROSPECTUS NOR ANY SALE MADE UNDER
THIS PROSPECTUS SUPPLEMENT AND PROSPECTUS SHALL UNDER ANY CIRCUMSTANCES, CREATE
AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF VALENCE SINCE THE
DATE OF THIS PROSPECTUS SUPPLEMENT OR IMPLY THAT INFORMATION CONTAINED IN THIS
PROSPECTUS SUPPLEMENT AND PROSPECTUS IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS
DATE.
------------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
PROSPECTUS SUPPLEMENT SUMMARY.......................................S-2
RISK FACTORS........................................................S-3
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS....................S-11
DIVIDEND POLICY....................................................S-11
USE OF PROCEEDS....................................................S-11
PRICE RANGE OF COMMON STOCK........................................S-12
PLAN OF DISTRIBUTION...............................................S-12
LEGAL MATTERS......................................................S-12
EXPERTS............................................................S-13
</TABLE>
<PAGE>
VALENCE TECHNOLOGY, INC.
BY THIS PROSPECTUS, WE MAY OFFER UP TO $50,000,000 OF OUR
COMMON STOCK
PREFERRED STOCK
WARRANTS
Our common stock is listed on the Nasdaq National Market under the
symbol "VLNC." On May 10, 1999 the closing sale price of a share of our common
stock, as reported on the Nasdaq National Market, was $7.09.
The securities offered or sold under this prospectus have not been
approved by the SEC or any state securities commission, nor have these
organizations determined that this prospectus is accurate or complete. Any
representation to the contrary is a criminal offense.
---------------------------
We will provide the specific terms of the securities offered in a
supplement to this Prospectus. You should read this Prospectus and the
supplements carefully before you invest.
---------------------------
This investment involves a high degree of risk. See "Risk Factors" in
the supplement to this prospectus.
---------------------------
We may offer the securities directly or through underwriters, agents or
dealers. The supplement will describe the terms of that plan of distribution.
"Plan of Distribution" below also provides more Information on this topic.
THE DATE OF THIS PROSPECTUS IS MAY 12, 1999.
<PAGE>
TABLE OF CONTENTS
PAGE
About this Prospectus........................................2
Where You Can Get More Information...........................2
About Valence................................................4
Risk Factors.................................................5
Use of Proceeds..............................................5
General Description of Securities............................5
Description of Preferred Stock...............................5
Description of Common Stock..................................6
Description of Warrants......................................7
Plan of Distribution.........................................8
Legal Matters................................................9
Experts......................................................9
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with
the SEC utilizing a "shelf" registration process. Under this shelf process, we
may from time to time offer up to $50,000,000 in the aggregate of (a) shares of
common stock, $0.001 par value per share, of Valence, (b) shares of preferred
stock, $0.001 par value per share, of Valence, in one or more series, (c)
warrants to purchase shares of common stock or preferred stock or (d) any
combination of the foregoing, either individually or as units consisting of one
or more of the foregoing, each at prices and on terms to be determined at the
time of sale. The common stock, preferred stock and warrants are collectively
referred to herein as "securities." The securities offered pursuant to this
prospectus may be issued in one or more series of issuances and the aggregate
offering price of the securities will not exceed $50,000,000 (or its equivalent
(based on the applicable exchange rate at the time of the sale) in one or more
foreign currencies, currency units or composite currencies as shall be
designated by Valence).
Each time we offer these securities, we will provide a prospectus
supplement that will contain specific information about the terms of that
offering.
The registration statement that contains this prospectus (including
exhibits to the registration statement) contains additional information about
our company and the securities offered under this prospectus. The registration
statement can be read at the SEC web site or at the SEC offices mentioned under
the heading "Where You Can Get More Information." This prospectus may not be
used to consummate sales of Securities unless accompanied by a prospectus
supplement.
WHERE YOU CAN GET MORE INFORMATION
We are a reporting company and file annual, quarterly and current
reports, proxy statements and other information with the SEC. You may read and
copy these reports, proxy statements and other information at the SEC's public
reference rooms in Washington, DC, New York, NY and Chicago, IL. You can request
copies of these documents by writing to the SEC and paying a fee for the copying
cost. Please call the SEC at 1-800-SEC-0330 for more information about the
operation of the public reference rooms. Our SEC filings are also available at
the SEC's web site at "http://www.sec.gov." In addition, you can read and copy
our SEC filings at the office of the National Association of Securities Dealers,
Inc. at 1735 "K" Street, Washington, DC 20006.
The SEC allows us to "incorporate by reference" information that we
file with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
an important part of this prospectus, and information that we file later with
the SEC will automatically update and supersede this information. We incorporate
by reference the documents listed below and any future filings we will make with
the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act
of 1934:
- - Annual Report on Form 10-K for the year ended March 29, 1998, filed June
29, 1998;
- - Current Report on Form 8-K, dated July 27, 1998 and filed August 4, 1998;
Page 2
<PAGE>
- - Quarterly Report on Form 10-Q, for the fiscal quarter ended June 28, 1998,
filed August 11, 1998;
- - Quarterly Report on Form 10-Q, for the fiscal quarter ended September 27,
1998, filed November 12, 1998;
- - Current Report on Form 8-K, dated December 18, 1998 and filed December 21,
1998;
- - Quarterly Report on Form 10-Q, for the fiscal quarter ended December 27,
1998, filed February 10, 1999;
- - Quarterly Report on Form 10-Q/A, for the fiscal quarter ended September 27,
1998, filed February 24, 1999;
- - Current Report on Form 8-K, dated May 5, 1999 and filed May 5, 1999; and
- - The description of the common stock contained in Valence's Registration
Statement on Form 8-A filed with the SEC under the Securities Exchange Act
of 1934.
You may request a copy of these filings at no cost, by writing,
telephoning or e-mailing us at the following address:
VALENCE TECHNOLOGY, INC., 301 CONESTOGA WAY, HENDERSON, NV 89015
(702) 558-1000 http://www.valence-tech.com
This prospectus is part of a Registration Statement we filed with the
SEC. You should rely only on the information incorporated by reference or
provided in this prospectus and the Registration Statement. We have not
authorized anyone else to provide you with different information. You should not
assume that the information in this prospectus or any supplement is accurate as
of any date other than the date on the front of those documents.
Page 3
<PAGE>
ABOUT VALENCE
OUR BUSINESS
We are engaged in research and development to produce advanced
rechargeable batteries based upon specialized technologies, which are referred
to in the industry as lithium ion and polymer technologies. Our objective is to
become a leading provider of rechargeable batteries. In July 1995, we announced
that we obtained a license to a related specialized battery technology from Bell
Communications Research, Inc. Since that time, we have been working to integrate
the Bell Communications technology with our own lithium polymer battery
technology. At the same time, we have continued the redesign and modifications
to our manufacturing equipment in Northern Ireland to support the potential
future commercial introduction of this new battery design.
THE MARKET FOR OUR BATTERIES
Widespread use of a variety of portable consumer electronics such as
portable computers, cellular telephones, camcorders and handheld power tools, as
well as continued demand from conventional applications such as automobiles,
have resulted in large markets for rechargeable batteries. These new and
conventional applications are placing growing demands on existing battery
technologies to deliver increasing amounts of electricity through smaller and
lighter batteries. In some cases, current battery capabilities are a major
limitation to the introduction of enhanced electronic products.
OUR STAGE OF DEVELOPMENT
We are a development stage company whose primary activities to date
have been:
- acquiring and developing technology;
- implementing a production line;
- manufacturing limited quantities of prototype batteries;
- recruiting personnel; and
- obtaining capital.
However, our current research prototype batteries meet some of the
exacting specifications demanded by the marketplace. Except for insubstantial
revenues from limited sales of prototype lithium polymer batteries, we presently
have no products available for sale. Prior to commencing volume production, we
do not expect to receive any significant revenues from the sale of our products.
To achieve profitable operations, we must successfully develop, manufacture and
market our products. There is a risk that we will not develop or manufacture our
products at an acceptable cost or with appropriate performance characteristics,
and that we will not be able to successfully market such products or that such
products will not achieve market acceptance. See "Risk Factors."
Page 4
<PAGE>
RISK FACTORS
An investment in our securities involves a high degree of risk. You
should carefully consider the information contained under the heading "Risk
Factors" in the applicable supplement to this prospectus before investing in our
securities.
USE OF PROCEEDS
Unless otherwise indicated in the applicable prospectus supplement, the
net proceeds from the sale of securities offered hereby will be used for general
corporate purposes. We expect from time to time to evaluate the acquisition of
products, businesses and technologies for which a portion of the net proceeds
may be used. Currently, however, we do not have any understandings, commitments
or agreements with respect to any material acquisitions for which a portion of
the net proceeds may be used.
GENERAL DESCRIPTION OF SECURITIES
We may offer under this prospectus shares of common stock, shares of
preferred stock, warrants to purchase common stock or preferred stock or any
combination of the foregoing, either individually or as units consisting of one
or more securities. The aggregate offering price of securities offered by us
under this prospectus will not exceed $50,000,000. If securities are offered as
units, the terms of the units will be set forth in a prospectus supplement.
Certain of the securities to be offered hereby involve a high degree of risk.
Such risks will be set forth in the prospectus supplement relating to such
security.
DESCRIPTION OF PREFERRED STOCK
GENERAL
Our Amended and Restated Certificate of Incorporation, as amended,
authorize the board of directors of Valence, without further shareholder action,
to provide for the issuance of up to 10,000,000 shares of preferred stock, in
one or more series, and to fix the designations, terms, and relative rights and
preferences, including the dividend rate, voting rights, conversion rights,
redemption and sinking fund provisions and liquidation values of each of these
series. We may amend from time to time our restated certificate to increase the
number of authorized shares of preferred stock. Any amendment like this would
require the approval of the holders of a majority of the common stock, without a
vote of the holders of preferred stock or any series thereof unless a vote of
any such holder is required pursuant to the restated certificate or certificates
of designations establishing a series of preferred stock. As of the date of this
prospectus, we have 15,000 shares of preferred stock outstanding, 7,500 shares
of which are Series A Preferred Stock and 7,500 shares of which are Series B
Preferred Stock.
The particular terms of any series of preferred stock being offered by
us under this shelf registration will be described in the prospectus supplement
relating to that series of preferred stock. Those terms may include:
- the title and liquidation preference per share of the preferred stock
and the number of shares offered;
- the purchase price of the preferred stock;
- the dividend rate (or method of calculation), the dates on which
dividends will be paid and the date from which dividends will begin to
accumulate;
- any redemption or sinking fund provisions of the preferred stock;
- any conversion provisions of the preferred stock;
- the voting rights, if any, of the preferred stock; and
- any additional dividend, liquidation, redemption, sinking fund and
other rights, preferences, privileges, limitations and restrictions of the
preferred stock.
Page 5
<PAGE>
If the terms of any series of preferred stock being offered differ from
the terms set forth in this prospectus, those terms will also be disclosed in
the prospectus supplement relating to that series of preferred stock. The
summary in this prospectus is not complete. You should refer to our restated
certificate establishing a particular series of preferred stock, which will be
filed with the Secretary of State of Delaware and the SEC in connection with the
offering of the preferred stock.
The preferred stock will, when issued, be fully paid and nonassessable.
The preferred stock will bear no dividends.
DIVIDEND RIGHTS
The preferred stock will be preferred over the common stock as to
payment of dividends. Before any dividends or distributions (other than
dividends or distributions payable in common stock) on the common stock shall be
declared and set apart for payment or paid, the holders of shares of each series
of preferred stock will be entitled to receive dividends when, as and if
declared by the board of directors of Valence. We will pay those dividends
either in cash, shares of common stock or preferred stock or otherwise, at the
rate and on the date or dates set forth in the prospectus supplement. With
respect to each series of preferred stock, the dividends on each share of the
series will be cumulative from the date of issue of the share unless some other
date is set forth in the prospectus supplement relating to the series. Accruals
of dividends will not bear interest.
RIGHTS UPON LIQUIDATION
The preferred stock will be preferred over the common stock as to
assets so that the holders of each series of preferred stock will be entitled to
be paid, upon our voluntary or involuntary liquidation, dissolution or winding
up and before any distribution is made to the holders of common stock, the
amount set forth in the applicable prospectus supplement. However, in this case
the holders of preferred stock will not be entitled to any other or further
payment unless otherwise specified in the applicable prospectus supplement. If
upon any liquidation, dissolution or winding up our net assets are insufficient
to permit the payment in full of the respective amounts to which the holders of
all outstanding preferred stock are entitled, our entire remaining net assets
and funds legally available for distribution to the preferred stock shall be
distributed ratably among such shares in proportion to the ratio that the
liquidation preference payable on each such share bears to the aggregate
liquidation preference payable on all such shares.
REDEMPTION
All shares of any series of preferred stock will be redeemable to the
extent set forth in the prospectus supplement relating to the series. All shares
of any series of preferred stock will be convertible into shares of common stock
or into shares of any other series of preferred stock to the extent set forth in
the applicable prospectus supplement.
VOTING RIGHTS
Except as indicated in the prospectus supplement, the holders of
preferred stock shall have no voting power whatsoever except as provided by law.
DESCRIPTION OF COMMON STOCK
As of the date of this prospectus, we are authorized to issue up to
50,000,000 shares of common stock of which 7,000,000 shares are reserved solely
for the purpose of effecting the conversion of the preferred stock. As of May
10, 1999, we had 26,736,292 shares of common stock issued and outstanding and
had reserved 8,250,000 additional shares of common stock for issuance under our
various stock and compensation incentive plans.
Page 6
<PAGE>
DIVIDENDS
The holders of common stock are entitled to receive dividends when, as
and if declared by the board of directors of Valence, out of funds legally
available for their payment.
VOTING RIGHTS
The holders of common stock are entitled to one vote per share on all
matters submitted to a vote of stockholders.
RIGHTS UPON LIQUIDATION
In the event of our voluntary or involuntary liquidation, dissolution
or winding up, the holders of common stock will be entitled to share equally in
any of our assets available for distribution after the payment in full of all
debts and distributions and after the holders of all series of outstanding
preferred stock have received their liquidation preferences in full.
MISCELLANEOUS
The outstanding shares of common stock are fully paid and
nonassessable. The holders of common stock are not entitled to preemptive or
redemption rights. Shares of common stock are not convertible into shares of any
other class of capital stock. Boston EquiServe is the transfer agent and
registrar for our common stock.
DESCRIPTION OF WARRANTS
We may issue warrants for the purchase of preferred stock or common
stock. Warrants may be issued independently or together with preferred stock or
common stock and may be attached to or separate from any offered securities.
Each series of warrants will be issued under a separate warrant agreement to be
entered into between us and a bank or trust company, as warrant agent. The
warrant agent will act solely as our agent in connection with the warrants and
will not assume any obligation or relationship of agency or trust for or with
any registered holders of warrants or beneficial owners of warrants. This
summary of some provisions of the warrants is not complete. You should refer to
the warrant agreement, including the forms of warrant certificate representing
the warrants, relating to the specific warrants being offered for the complete
terms of the warrant agreement and the warrants. That warrant agreement,
together with the terms of warrant certificate and warrants, will be filed with
the SEC in connection with the offering of the specific warrants.
The particular terms of any issue of warrants will be described in the
prospectus supplement relating to the issue. Those terms may include:
- the designation, number of shares, stated value and terms (including,
without limitation, liquidation, dividend, conversion and voting rights) of the
series of preferred stock purchasable upon exercise of warrants to purchase
shares of preferred stock and the price at which such number of shares of
preferred stock of such series may be purchased upon such exercise;
- the number of shares of common stock purchasable upon the exercise of
warrants to purchase shares of common stock and the price at which such number
of shares of common stock may be purchased upon such exercise;
- the date on which the right to exercise the warrants will commence and
the date on which the right will expire;
- United States Federal income tax consequences applicable to the
warrants; and
- any other terms of the warrants.
Page 7
<PAGE>
Warrants for the purchase of preferred stock and common stock will be
offered and exercisable for U.S. dollars only. Warrants will be issued in
registered form only. The exercise price for warrants will be subject to
adjustment in accordance with the applicable prospectus supplement.
Each warrant will entitle its holder to purchase the number of shares
of preferred stock or common stock at the exercise price set forth in, or
calculable as set forth in, the applicable prospectus supplement. The exercise
price may be adjusted upon the occurrence of certain events as set forth in the
prospectus supplement. After the close of business on the expiration date,
unexercised warrants will become void. We will specify the place or places
where, and the manner in which, warrants may be exercised in the applicable
prospectus supplement.
Prior to the exercise of any warrants to purchase preferred stock or
common stock, holders of the warrants will not have any of the rights of holders
of the preferred stock or common stock purchasable upon exercise, including the
right to vote or to receive any payments of dividends on the preferred stock or
common stock purchasable upon exercise.
PLAN OF DISTRIBUTION
We may sell the securities through underwriters, agents or dealers or
directly to purchasers. A prospectus supplement will set forth the terms of each
specific offering, including the name or names of any underwriters or agents,
the purchase price of the securities and the proceeds to us from such sales, any
delayed delivery arrangements, any underwriting discounts and other items
constituting underwriters' compensation, any initial public offering price and
any discounts or concessions allowed or reallowed or paid to dealers. Any
initial public offering price and any discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.
If underwriters are used in the sale, the securities will be acquired
by the underwriters for their own account and may be resold from time to time in
one or more transactions, including negotiated transactions, at a fixed public
offering price or at varying prices determined at the time of sale. The
securities may be offered to the public either through underwriting syndicates
represented by one or more managing underwriters or directly by one or more
firms acting as underwriters. The underwriter or underwriters with respect to a
particular underwritten offering and, if an underwriting syndicate is used, the
managing underwriter or underwriters will be set forth on the cover of such
prospectus supplement. Unless otherwise set forth in the prospectus supplement,
the underwriters will be obligated to purchase all the securities if any are
purchased.
During and after an offering through underwriters, the underwriters may
purchase and sell the securities in the open market. These transactions may
include overallotment and stabilizing transactions and purchases to cover
syndicate short positions created in connection with the offering. The
underwriters also may impose a penalty bid, under which selling concessions
allowed to syndicate members or other broker-dealers for the securities they
sell for their account may be reclaimed by the syndicate if the syndicate
repurchases the securities in stabilizing or covering transactions. These
activities may stabilize, maintain or otherwise affect the market price of the
securities then offered, which may be higher than the price that might otherwise
prevail in the open market, and, if commenced, may be discontinued at any time.
We may sell the securities directly or through agents we designate from
time to time. Any agent involved in the offer or sale of the securities covered
by this prospectus will be named, and any commissions payable by us to an agent
will be set forth, in a prospectus supplement relating thereto. Unless otherwise
indicated in a prospectus supplement, any such agent will be acting on a best
efforts basis for the period of its appointment.
If dealers are used in any of the sales of securities covered by this
prospectus, we will sell those securities to dealers as principals. The dealers
may then resell the securities to the public at varying prices the dealers
determine at the time of resale. The names of the dealers and the terms of the
transactions will be set forth in a prospectus supplement.
We may sell the securities directly to institutional investors or
others who may be deemed to be underwriters within the meaning of the Securities
Act with respect to any sale thereof. The terms of any such sales will be
described in a prospectus supplement.
If so indicated in a prospectus supplement, we will authorize agents,
underwriters or dealers to solicit offers from certain types of institutions to
purchase securities from us at the public offering price set forth in the
prospectus
Page 8
<PAGE>
supplement pursuant to delayed delivery contracts providing for
payment and delivery on a specified date in the future. These contracts will be
subject only to those conditions set forth in the prospectus supplement, and the
prospectus supplement will set forth the commission payable for solicitation of
such contracts.
Agents, dealers and underwriters may be entitled under agreements
entered into with us to indemnification by us against certain civil liabilities,
including liabilities under the Securities Act, or to contribution with respect
to payments which such agents, dealers or underwriters may be required to make
in respect thereof. Agents, dealers and underwriters may be customers of, engage
in transactions with, or perform services on our behalf.
LEGAL MATTERS
The validity of any securities offered by this prospectus or any
supplement will be passed upon for Valence by Cooley Godward LLP, Palo Alto,
California.
EXPERTS
The consolidated balance sheets as of March 29, 1998 and March 30, 1997
and the consolidated statements of operations, stockholders' equity (deficit),
and cash flows for the period from March 3, 1989 (date of inception) to March
29, 1998 and for each of the years ending March 29, 1998, March 30, 1997 and
March 31, 1996 incorporated by reference in this prospectus, have been
incorporated in the reliance on the report, which includes an explanatory
paragraph regarding Valence's ability to continue as a going concern, of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
that firm as experts in accounting and auditing.
The balance sheet as of March 31, 1998, and the statements of
operations and accumulated deficit and cash flows for the year ended March 31,
1998, and incorporated by reference in this prospectus, have been incorporated
in the reliance on the report, which includes an explanatory paragraph regarding
Hanil Valence Co., Ltd.'s ability to continue as a going concern, of Samil
Accounting Corporation, independent accountants, given on the authority of that
firm as experts in accounting and auditing.
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